Annual Financial Accountability
Management Report
For the Year Ending August 31, 2011
Dr. Greg Smith, Superintendent of Schools
Paul McLarty, RSBA, RTSBA, Deputy Superintendent of Business and Support Services
Jeff Kohlenberg, CPA, RTSBA, Director of Financial Services
Table of Contents
Page
Introduction 3
Financial Accountability Ratings Worksheet for 2010-2011 4 - 6
Overview of the Worksheet
Critical Indicators 7
Fiscal Responsibility 7
Budgeting 7
Personnel 7
Cash Management 7
Other Data Concerning the District’s Operations:
Financial Strength 8
Operating Cost Management 8
Personnel Management 10
Debt Management 10
Cash Management 10
Tax Collections 11
Budgetary Planning & Financial Allocations 11
Budget and Financial Reporting Awards 12
Reporting Requirements under Financial Solvency Provisions of TEC 39.0882
General Fund - First Quarter 2011-2012 Expenditures 12
Additional Financial Solvency Questions 12
Reporting Requirements for Superintendent and Board of Trustees:
Superintendent and Board of Trustees Reimbursements 13
Superintendent Outside Compensation 13
Executive Officers and Board of Trustees Gifts 13
Introduction
During the 77th
regular session of the Texas legislature (2001), Senate Bill 218 was passed and
Governor Perry signed it into law shortly thereafter. This law requires each school district to
prepare an annual financial accountability report within two months of the date of issuance of the
final School FIRST ratings. The District’s received official notification of the 2011 Final
School FIRST rating on September 20, 2012 for the 2010-2011 fiscal year.
Many business-related issues are covered in this report. The primary reporting tool, however, is
the Financial Accountability Ratings Worksheet. This worksheet was developed by
representatives of the Texas Education Agency (TEA), the Texas Business & Education Council
(TBEC) and the Texas Association of School Business Officials (TASBO). It is administered by
the TEA and calculated on information submitted to the Agency via our PEIMS submission each
year. PEIMS data has always been critical on the student side of the submission, and this project
added a great degree of importance to our finance submission each year.
The worksheet consists of 20 Indicators, each weighted equally with the exception of the Critical
Indicators. A “No” response in Indicators #1, #2, #3 or #4 or a “No” response to both Indicators
#5 and #6 together automatically result in a rating of Substandard Achievement, so these first
six Indicators are of utmost importance.
New provisions implemented during the 2006-2007 fiscal year were adopted by the
Commissioner’s rulemaking authority. The adopted amendment updated the rating system by
adding one new critical indicator and enhancing other existing indicators.
Currently, Clear Creek ISD enjoys a rating of “Superior Achievement”, scoring 70 points
on the financial accountability worksheet. The worksheet itself and a discussion of its salient
points follow.
Clear Creek Independent School District
Annual Financial Accountability
Management Report
3
Financial Integrity Rating System of Texas
2010-2011 DISTRICT STATUS DETAIL
Name: CLEAR CREEK ISD(084910) Publication Level 1: 6/28/2012 12:33:14 PM
Status: Passed Publication Level 2: None
Rating: Superior Achievement Last Updated: 6/28/2012 12:33:14 PM
District Score: 70 Passing Score: 52
# Indicator Description Updated Score
1 Was The Total Fund Balance Less Nonspendable and Restricted Fund
Balance Greater Than Zero In The General Fund?
6/15/2012
3:20:53 PM
Yes
2 Was the Total Unrestricted Net Asset Balance (Net of Accretion of
Interest on Capital Appreciation Bonds) In the Governmental Activities
Column in the Statement of Net Assets Greater than Zero? (If the
District's 5 Year % Change in Students was 10% more)
6/15/2012
3:20:53 PM
Yes
3 Were There No Disclosures In The Annual Financial Report And/Or
Other Sources Of Information Concerning Default On Bonded
Indebtedness Obligations?
6/15/2012
3:20:54 PM
Yes
4 Was The Annual Financial Report Filed Within One Month After
November 27th or January 28th Deadline Depending Upon The District's
Fiscal Year End Date (June 30th or August 31st)?
6/15/2012
3:20:54 PM
Yes
5 Was There An Unqualified Opinion in Annual Financial Report? 6/15/2012
3:20:54 PM
Yes
6 Did The Annual Financial Report Not Disclose Any Instance(s) Of
Material Weaknesses In Internal Controls?
6/15/2012
3:20:54 PM
Yes
1 Multiplier
Sum
7 Was The Three-Year Average Percent Of Total Tax Collections
(Including Delinquent) Greater Than 98%?
6/15/2012
3:20:55 PM
5
8 Did The Comparison Of PEIMS Data To Like Information In Annual
Financial Report Result In An Aggregate Variance Of Less Than 3
Percent Of Expenditures Per Fund Type (Data Quality Measure)?
6/15/2012
3:20:55 PM
5
4
9 Were Debt Related Expenditures (Net Of IFA And/Or EDA Allotment) <
$350.00 Per Student? (If The District's Five-Year Percent Change In
Students = Or > 7%, Or If Property Taxes Collected Per Penny Of Tax
Effort > $200,000 Per Student)
6/15/2012
3:20:56 PM
5
10 Was There No Disclosure In The Annual Audit Report Of Material
Noncompliance?
6/15/2012
3:20:56 PM
5
11 Did The District Have Full Accreditation Status In Relation To Financial
Management Practices? (e.g. No Conservator Or Monitor Assigned)
6/15/2012
3:20:56 PM
5
12 Was The Aggregate Of Budgeted Expenditures And Other Uses Less
Than The Aggregate Of Total Revenues, Other Resources and Fund
Balance In General Fund?
6/15/2012
3:20:57 PM
5
13 If The District's Aggregate Fund Balance In The General Fund And
Capital Projects Fund Was Less Than Zero, Were Construction Projects
Adequately Financed? (To Avoid Creating Or Adding To The Fund
Balance Deficit Situation)
6/15/2012
3:20:57 PM
5
14 Was The Ratio Of Cash And Investments To Deferred Revenues
(Excluding Amount Equal To Net Delinquent Taxes Receivable) In The
General Fund Greater Than Or Equal To 1:1? (If Deferred Revenues Are
Less Than Net Delinquent Taxes Receivable)
6/15/2012
3:20:57 PM
5
15 Was The Administrative Cost Ratio Less Than The Threshold Ratio? 6/15/2012
3:20:58 PM
5
16 Was The Ratio Of Students To Teachers Within the Ranges Shown Below
According To District Size?
6/15/2012
3:20:58 PM
5
17 Was The Ratio Of Students To Total Staff Within the Ranges Shown
Below According To District Size?
6/15/2012
3:20:58 PM
5
18 Was The Decrease In Undesignated Unreserved Fund Balance < 20%
Over Two Fiscal Years?(If Total Revenues > Operating Expenditures In
The General Fund,Then District Receives 5 Points)
6/15/2012
3:20:59 PM
5
19 Was The Aggregate Total Of Cash And Investments In The General Fund
More Than $0?
6/15/2012
3:20:59 PM
5
20 Were Investment Earnings In All Funds (Excluding Debt Service Fund 6/15/2012 5
5
and Capital Projects Fund) Meet or Exceed the 3-Month Treasury Bill
Rate?
3:21:00 PM
70
Weighted
Sum
1 Multiplier
Sum
70 Score
DETERMINATION OF RATING
A. Did The District Answer 'No' To Indicators 1, 2, 3 Or 4? OR Did The District Answer
'No' To Both 5 and 6? If So, The District’s Rating Is Substandard Achievement.
B. Determine Rating By Applicable Range For summation of the indicator scores
(Indicators 7-20)
Superior Achievement 64-70
Above Standard Achievement 58-63
Standard Achievement 52-57
Substandard Achievement <52
INDICATOR 17 & 18 RATIOS
Indicator 17 Ranges for
Ratios
Indicator 18 Ranges for
Ratios
District Size - Number of
Students Between Low High
District Size - Number of
Students Between Low High
< 500 7 22 < 500 5 14
500-999 10 22 500-999 5.8 14
1000-4999 11.5 22 1000-4999 6.3 14
5000-9999 13 22 5000-9999 6.8 14
=> 10000 13.5 22 => 10000 7.0 14
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Overview of the Worksheet
Critical Indicators
Indicators #1 through #6 are the critical indicators. Any “NO” response in this category is a
signal indicator of fiscal distress. These six indicators revolve around the audit report, fund
balance and the auditor’s findings. If General Fund Balance is greater than zero and the auditors
issue a “clean” opinion, a District will pass the critical indicators. For the 2010-2011 fiscal year,
Clear Creek ISD had a General Fund Balance of $55.7 million and passed all other critical
indicators.
Fiscal Responsibility
Indicators #7 through #11 concern fiscal responsibility. Clear Creek ISD’s percentage of tax
collections easily exceeds the increased minimum standard of 98.0% required in Indicator #7.
For the year under review, taxes were collected at a rate of 99.7%. The District passed Indicator
#9 which required that the District’s PEIMS financial data submission agree to the Annual
Financial Report. The District also passed Indicator #9 due to taxes collected per penny of tax
effort exceeding $200,000. Indicators #10 and #11 are very similar to the Critical Indicators, and
Clear Creek easily passed these two on audit and full financial accreditation status.
Budgeting
Indicators #12 through #14 concern budgeting, management and cash flow practices. The
District adequately funds its budget and capital projects. Most importantly, as addressed in
Indicator #14, the District does not spend cash it cannot afford to spend or cannot recognize as
revenue.
Personnel
Indicators #15 through #17 address staffing patterns. For the 2010-11 year, the District’s
administrative cost ratio was well below that of the State standard of 11.05% at 4.56%. This
item is addressed in more detail later in the report. Indicators #16 and #17 deal with staffing
patterns, specifically students to classroom teachers and students to total staff. A District must
fall into a certain range to meet these indicators, which means understaffing or overstaffing can
trigger a “NO” response. The District falls safely within the prescribed ranges for each indicator
at 14.5 students per classroom teacher and 7.7 students per staff member.
Cash Management
The final three indicators deal with cash management practices. Indicator #18 deals with any
decrease in General Fund Balance over two years. Since our unassigned fund balance increased
over the two years, we easily met this indicator. Cash and investments were greater than $0, so
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Indicator #19 was easily surpassed, and investment earnings were approximately 0.68%,
exceeding the 3-Month Treasury Bill rate of 0.095% set forth in Indicator #20.
Summary
The Clear Creek ISD School Board, administration and the community have worked hard to
improve and maintain the financial condition of the District. This report demonstrates this
improvement to all concerned.
Other Data Concerning the District’s Operations
The purpose of this section of the report is to discuss other aspects of our business operations not
covered by the worksheet, but suggested by law as indicators of significance meriting discussion.
We should view the worksheet as a good basic tool with which to assess our primary business
practices. However, we should not stop there. We should always be working towards
improvement in all aspects of our operation to maximize funds available to campuses for
educational purposes and to our ancillary departments that support our campuses.
Below is a review of several business practices not covered by the Financial Accountability
Worksheet directly.
Financial Strength
The State of Texas recommends that we discuss financial strength in this report. This is a
difficult topic to address because there are many measures of financial strength, some are better
than others, and it’s hard to tell which one is the best measure. For Clear Creek ISD, we believe
the most significant financial indicator of strength is our ability to maintain our unassigned fund
balance to a level where we do not have to borrow funds to cover operating shortfalls during
September through December of each fiscal year. Over the last fourteen years, we have been
able to increase our unassigned fund balance from $9.7 million to $45.2 million. At this time,
our fund balance is at a sufficient level to cover cash flow deficits due to the timing of property
tax collections.
Operating Cost Management
Only a small portion of our total General Fund expenditures is flexible or variable in nature.
Salaries and benefits comprise approximately 84.7% of the budget each year. Utility payments
fluctuate from year to year, but comprise approximately 3.8% of the budget. Property insurance
and appraisal district fees comprise an additional 1.9% of the budget. These four items alone
account for approximately 90% of the District’s operating budget each year. Once you remove
these four large expenditures from the operating budget, you are left with only a small portion of
the budget that covers all other expenditures of the District. The chart below illustrates the
breakdown of the operating budget:
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Instruction and Related Services 67.8%
Facilities Maintenance & Upkeep 7.3%
Campus Administration 6.3%
Student Transportation 3.5%
Guidance and Counseling Services 3.5%
Extracurricular & Cocurricular 2.5%
Data Services 2.3%
General Administration 2.1%
Other 1.7%
Security 1.1%
Instructional Administration 1.0%
Health Services 1.0%
One measure the State of Texas uses to indicate operating cost efficiency is the administrative
cost ratio. Texas has a formula that is mandated by law. Simply, it takes administrative costs
and divides them by instructional costs to arrive at a percentage. A district’s size determines
their administrative cost limitation. Based on Clear Creek ISD’s size, our administrative cost
limit is 11.05%. This criterion is covered in the worksheet for last year only, but since it deals
with the sensitive issue of administrative costs, we felt it prudent to demonstrate how our ratio
has actually remained low over the past several years.
Administrative Cost Comparison
Year
State
Limit
District
Actual
Amount
Under Limit
2006-2007 11.05% 6.14% $ 6,879,322
2007-2008 11.05% 5.75% $ 8,053,414
2008-2009 11.05% 4.89% $10,486,657
2009-2010 11.05% 4.63% $11,877,118
2010-2011 11.05% 4.56% $11,693,516
In a time of rising salaries and increased costs, Clear Creek ISD has been able to maintain
administrative costs as a percentage of instructional costs at a low and constant rate. We have
done so via a conscious and concerted effort to funnel every possible dollar to the campuses to
serve the needs of the students first. This chart, more than any other indicator, clearly
demonstrates that we are putting our money into providing educational opportunities for our
students, which is our #1 priority.
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Personnel Management
The District’s longstanding personnel goal is to attract and retain qualified staff, and to offer a
competitive salary and benefit package to all employees. Each year, we have offered a
competitive total compensation package to our teaching staff. It hasn’t always been easy to do
so, but we have managed to find the funding to fit this total benefit package into our budget.
Second only to our students’ welfare and education, attracting and retaining a quality teaching
staff has been a priority for Clear Creek ISD.
Debt Management
The district uses 25 years for repayment of bonds for construction of facilities, even though the
life of the building to be built is much longer. In no instance does the district finance bonds for a
longer period than the life expectancy of the capital improvement. The repayment timelines for
technology bonds are parallel to the minimal life expectancy of the equipment.
As our district continues to face the many challenges associated with rapid growth, our Board of
Trustees unanimously called for a bond referendum on May 12, 2007. With a 72% approval rate,
the taxpayers authorized $183 million to build four new schools, convert two ninth grade centers
back to intermediate schools, increase the number of math and science classrooms at all high
schools, add and replace buses, and other capital improvement projects. This referendum is being
funded by a two cent increase on the Interest and Sinking (I&S) tax rate.
The District continually monitors outstanding debt and takes opportunities to reduce interest
costs when available. Over the last three years, Clear Creek ISD has realized savings of
approximately $10.7 million due to bond refundings. Debt management is easier if local taxes
are collected at a high collections rate consistently over the years. One of the worksheet
indicators deals with this issue. Clear Creek’s collection rates for the past five years have
consistently exceeded 99.5%.
Cash Management
The worksheet addresses a couple of cash and investment issues, but only in a very basic
manner. The worksheet indicators essentially require that a District have cash available and that
a minimal rate of return is earned. In truth, our investment and cash management program is
much more complex.
First, we have a state and local board policy that requires us to invest funds with six objectives in
mind. In order of importance, they are: suitability, safety, liquidity, marketability, diversity and
yield. State and local policy specify what types of securities we can purchase. We do not
purchase investments that fall outside these policy restrictions.
There are a few investments that are legal for us to purchase, but they aren’t very marketable.
Consequently, we don’t buy them. We strive to maintain diversity in our portfolio, balancing
cash in money market pools and directly owned securities such as Treasury Bills and other
government agency issues.
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Also, we benchmark our portfolio’s yield each month to the three and six month Treasury Bill
rates, the Federal Funds rate and the Jumbo CD rate. We use these as a comparison only to
determine if our portfolio is yielding a comparable market rate of return each month. A Cash &
Investment Report is included quarterly in the Board of Trustees meeting agenda for review and
approval.
Tax Collections
Indicator #7 discusses tax collections for the year under review. As important as this indicator is
from year to year, we felt additional discussion was warranted since 56% of the District’s
operating revenue came from local sources in 2010-2011. The minimum collection rate for
current and delinquent taxes for Indicator #7 is 98%. The District collection rates for the last five
years are as follows:
For Year Ended
Total Tax
Collections
8/31/2007 99.7%
8/31/2008 99.9%
8/31/2009 99.8%
8/31/2010 99.9%
8/31/2011 99.7%
Had our District only collected the minimum of 98% during the 2010-2011 fiscal year, we would
have seen a $4.1 million reduction in property tax revenue.
Budgetary Planning & Financial Allocations
The District’s budget process usually begins in the Fall each year with the Board setting budget
goals. During the first month of planning, budget allocations are developed for each campus and
department. In addition, a budget manual is updated for the new year and distributed to all
budget managers.
Most school districts have some rational basis for allocating funds to campuses and operating
departments. In Clear Creek ISD, we allocate funds to campuses based on the number of
students attending that campus. Support departments get funds based on their previous year’s
budget adjusted (up or down) for future years’ needs. Special project requests for amounts
supplemental to allocations are considered individually each year.
In February, we begin attempting to calculate state and local tax revenues and the budget starts to
take on some form. For teacher recruiting purposes, the optimal time for making a public salary
decision is March. Also during the month of March the Board is given a draft of the five year
long-range financial plan. May is the month we are first able to give the Board and the public a
preliminary view of how the next year’s budget looks. May through July are busy months
budget-wise, with Board workshops and meetings with the District’s Budget Committee.
Decisions are made on special project requests, revenue data is fine-tuned and a final budget is
11
submitted to the Board of Trustees for approval in August. In odd-numbered years, the
legislature is in session, and that complicates and delays our budgeting process.
Our budget process is a proactive and highly participatory one, where campuses and departments
are given a great deal of discretion as to how to budget their funds. After the budget is adopted,
each campus or department is given equal latitude regarding amending their budget when their
plans or needs change. This decentralized style of budget management is required by the State
of Texas to a certain degree. We call it site-based decision making. It’s our version of campus
empowerment. Most importantly, it is a system that works best in the long run for all of us by
allocating resources where they are needed, even when those needs change.
Budget and Financial Reporting Awards
Government Finance Officers Association (GFOA)
Distinguished Budget Presentation Award
Certificate of Achievement for Excellence in Financial Reporting
Association of School Business Officials International (ASBO)
Meritorious Budget Award
Certificate of Excellence in Financial Reporting
Texas Comptroller Gold Leadership Circle for Financial Transparency
Reporting Requirements under Financial Solvency Provisions of TEC 39.0882
General Fund – First Quarter Expenditures 2011-2012
Payroll $56,942,567
Contract Costs $ 3,067,026
Supplies and Materials $ 2,380,864
Other Operating Costs $ 3,989,967
Debt Service $ 0
Capital Outlay $ 49,291
Additional Financial Solvency Questions
Clear Creek Independent School District did not draw funds from short-term financial notes
between the months of September and December.
Clear Creek Independent School District has not declared financial exigency within the past two
years.
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Clear Creek Independent School District student-to-staff ratios are within the acceptable range
for school districts of the same size. There has been not rapid depletion of General Fund balances
or any significant discrepancies between actual budget figures and projected revenue and
expenditures.
There have been two superintendents and one business manager for Clear Creek Independent
School District in the past five years.
Reporting Requirements for Superintendent and Board of Trustees
Superintendent and Board of Trustees Travel Expenditures
For the twelve month period ended August 31, 2011
Greg Smith Ken Baliker Robert Davee Ann Hammond
Meals 43.69 0.00 0.00 25.40
Lodging 818.80 0.00 0.00 0.00
Transportation 1,112.04 0.00 0.00 0.00
Registration 793.81 185.30 185.30 185.30
Other 0.00 0.00 0.00 0.00
Total 2,768.34 185.30 185.30 210.70
Charles Pond Page Rander Dee Scott Win Weber
Meals 25.40 0.00 25.40 25.40
Lodging 0.00 0.00 0.00 0.00
Transportation 0.00 0.00 0.00 0.00
Registration 185.30 60.00 110.30 185.30
Other 14.00 0.00 0.00 0.00
Total 224.70 60.00 135.70 210.70
Superintendent Outside Compensation
Greg Smith, Ph.D. did not receive any outside compensation or fees for professional consulting
or other personal services for the twelve month period ended August 31, 2011.
Executive Officers and Board of Trustees Gifts
Executive Officers and Board Members did not receive gifts that had an economic value of $250
or more in aggregate for the twelve month period ended August 31, 2011.
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